Why British American Tobacco plc, SABMiller plc And Prudential plc Are Soaring

While the FTSE 100 edges ever closer to 7,000 — it was just 26 points short at 6,974 on Monday — some of its constituents are soaring, and they could have a lot further to go. Here are three of the week’s big winners:


Despite a bad year in 2013, British American Tobacco (LSE: BATS)(NYSE: BATS.US) shares have had a very decent five-year run with a 74% gain against the FTSE 100‘s 24%, and it paid better dividends than average too.

This week the price has soared to 3,888p, so what’s it doing right? Results for 2015 showed a 4% fall in adjusted EPS, but that was expected and the well-covered dividend was lifted by 4%. Actual cigarette volumes fell, but the company is doing well at shifting its product balance towards its premium brands.

P/E might look  bit high at 17 to 18, but 4% dividend yields and better are worth paying a little more for, and growth could continue for some time as an increasingly wealthy world looks to more upmarket and higher-margin brands.


SABMiller (LSE: SAB)(NASDAQOTH:SBMRY.US) has an enviable reputation for beating the FTSE over the long term too, and the share price climbed to 3,780p this week to take it up 28% over the past 12 months and up 101% over five years — but dividend yields are relatively low at only around 2%.

The attraction of SABMiller is its growth potential, with the firm dominating its home market of South Africa and expanding nicely in its other markets. We’ve seen years of EPS growth, and though there’s a modest 2% fall forecast for the year to March 2015, growth is expected to resume in 2016.

The shares are on forecast P/E ratios of over 20, but as long as the growth continues that valuation could easily be maintained.


When the rest of the insurance sector was in trouble, the ever-safe Prudential (LSE: PRU) just sailed through, and having peaked at 1,687p this week its shares are up a massive 200% over three years, for the best performance of these three by far.

And it’s not hard to see why, when the worst year for the Pru during the recession saw a mere 1% rise in EPS amid a record of double-digit rises every other year with more of the same forecast. There’s a forward P/E of under 15 for this year, dropping to 13 based on 2016 forecasts, and that’s not expensive for such a byword for reliability.

The dividend yield might be a bit low at about 2.5% going forward, but it’s typically around 2.8 times covered and must be about the safest on the market.

Buying solid FTSE 100 shares like these for the long term could help you amass a very healthy fortune.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.